Guidance note to assist listed companies in applying the UK Corporate Corporate Governance
The Financial Reporting Council (the FRC) is the guardian of the UK Corporate Governance Code (the Code). The Code is the gold standard of corporate governance practice. All companies with a Premium Listing of equity shares must, under Listing Rule 9.8.6, set out in their annual report and accounts how they have applied the Code and must either comply with its provisions or explain why they have not – “comply or explain”. The Code is also a benchmark for corporate governance for other publicly-traded companies, including companies admitted to trading on AIM, and for large private companies.
The FRC has today published a new guidance note on board effectiveness (the Guidance). This is the FRC’s fourth published guidance on aspects of the Code; the others being on Going Concern and Liquidity Risk, Internal Control and Audit Committees.
Board effectiveness guidance
The new Guidance, which can be read here, is not intended to prescriptive; rather, in the FRC’s words, “it is intended to stimulate boards’ thinking on how they can carry out their role most effectively”. The publication and contents of the Guidance reflects the post-financial crisis emphasis on the importance of board roles and behaviours, rather than on structures and processes.
The Guidance, which relates to Sections A and B of the Code on the leadership and effectiveness of the board, covers:
- The role of the board and directors (including the chairman, the senior independent director, executive and non-executive directors).
- Board support and the company secretary.
- Decision-making.
- Board composition and succession planning.
- Evaluating board and director performance.
- Audit, risk and remuneration.
- Relations with shareholders.
The Guidance replaces the Higgs Guidance, which is withdrawn.
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